Wasted

Internal comments from one of the Big Five show mortgage originations have choked. The decline from this time last year is in the 45% range. ‘It’s a disaster,’ was the observation. And the body count in mortgage departments is quickly changing. Be happy you don’t work there, or in a branch with lending quotas.

As forecast here, the Bank of Canada benchmark mortgage rate has just increased by twenty bips, to 5.34%. That happens automatically when the chartered banks all increase their home loan costs, which transpired over the last ten days. It’s the new stress test hurdle. Anyone shopping for a mortgage or switching lenders upon renewal must prove they can handle payments which are the greater of (a) 5.34% or (b) the rate offered by the bank, plus 2%.

It matters not how much equity you have in your home nor the size of down payment. All face the stress test. It’s an effective barrier to people who formerly could save money by shopping the market, plus it means a loan from the Bank of Mom no longer exempts new buyers from proving they can finance at higher rates. As mentioned here yesterday, a household with a $100,000 income and fifty grand for a deposit must now shop for a house costing far less.

Those failing the test won’t get a loan from a bank. Or, soon, most credit unions. It’s that simple. This is why the subprime lending business has been growing by leaps and bounds. Those lenders don’t actually care if you can technically afford payments or not since they’re willing to take the risk – and assume ownership of your house if you fail. So, a whack of people are now carrying financing at 8% or above. They’re the ones at Tim’s who used to be at Starbucks. They’re doomed.

Complicating things and slowing the market is the tsunami of mortgage renewals in 2018 – almost half all existing loans are coming due. Not only are many borrowers unable to switch lenders (because of B20), but they’ll be renewing at higher levels – reducing cash flow. Selling your house and moving up the property ladder is also tougher. Higher posted rates means increased penalties for breaking an existing mortgage, while the stress test kicks in when you apply for a new one. If you wonder why markets in Toronto and Vancouver are eroding from the top, chew on that.

The point of the regulatory bottleneck is simple – reducing risk to banks. Low rates and fevered buying pushed house prices too high. Then a crush of HELOC borrowing developed, largely financing more real estate purchases. Unknown numbers of families leveraged their own appreciating homes to hand over down payments to adult children who couldn’t otherwise afford to buy. That way the kids had the 20% required to avoid mortgage insurance, plus escape the old stress test for new buyers.

But no more. When half the banks’ mortgage portfolios were uninsured, the regulatory dropped the hammer.We knew the impact of the stress test would take months to become evident. And we’re rapidly approaching that point.

Last month – usually peak real estate rutting season – was a mess. For example, just over 40% of pre-sale condos available in Vancouver sold compared to almost 95% in January. Detached home sales crashed 34% in YVR and 38% in the GTA. Prices in Toronto declined 14%, and in Vancouver condo sales dipped overall by 24%. The old adage has been proven true again – when prices fall, buyers leave. When prices surge, buying explodes. Human emotion, not logic, sets the tone. Greed has turned into fear. Properties are seen as risky assets likely to decline further. Higher rates and higher taxes just underscore what regulatory castration has done. And it’s just begun.

So, many renewers are trapped. And what a coincidence all the banks have raised lending costs when you can’t get out! Almost like they knew about the tidal wave of maturing loans…

As for wannabe buyers who can’t pass the test, three choices. (a) Move and buy a perfectly fine house where real estate costs less and the locals have no idea what FOMO means. Mom will understand. Really. (b) Buy a lesser property. (There actually used to be things called ‘starter homes.’) or, (c) rent.

Go subprime? Forget it. They are the walking dead.

155 comments ↓

HOUSING BUBBLE TRUE OR FALSE (searching for a grain of truth in the unsubstantiated claims of realtors)

* “Unusually high increases in rents and an unusually low vacancy rate are the new normals.”
False. Rent bubbles are common with housing bubbles and rent bubbles deflate along with housing bubbles. Hundreds of years of housing bubble history proves it.

* “House prices will keep rising forever so if you don’t buy now you’ll be damaging your family’s future financial well-being.”
False. Housing bubbles always go through major price corrections that take prices back to the long-term mean. History has shown that buying in a bubble at bloated price levels has resulted in financial devastation for millions of families worldwide.

* “If prices do fall it will only be a small correction so it isn’t worth sitting on the sidelines waiting for lower prices.”
False. History has shown that housing bubbles don’t go through small price declines and that those who hold off from buying until after prices have fallen back to the long-term mean not only avoid potential financial ruin but end up buying at appreciation-friendly price levels.

* “Any price correction would take a long time so it isn’t worth waiting on the sidelines.”
False. History has proven that major price corrections of housing bubbles don’t take a long time to play out. The American correction, as one of history’s many examples, demonstrated how prices in a bubble don’t fall slowly, safely, orderly or softly. In San Francisco, for example, house prices more than doubled in 6 years but it took only 3 years for prices to lose basically half their value (- 45 %) as they fell back to the long-term mean. (Case-Shiller Index).

* “Low inventory will be permanent and prices will keep rising forever.”
False. History has no example of a housing bubble anywhere in the world at any time where low inventory became the new normal and kept house prices permanently bloated. Again, all housing bubbles go through major price corrections.

What is a few mil here or there. Peeps in the lower mainland are used to talking in huge numbers, a bit more a month, so what.. As soon as everyone finds out how awesome Vancouver is, or Amazon sets up shops, it is off to the races. BUY NOW

Meh, as a renter with a significant amount of my savings in shares of the big 5, all that matters to me is that they keep paying me my dividends. And I trust that they will squeeze borrowers as much as they need to in order to make this happen.

@#168 Another Cranky Boomer
“However, Baddeck has its own tax revolt involving the estate of Alexander Graham Bell. You YVR residents can take a look at the building and the amounts involved. Then you can either laugh or cry.”
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Almost bought some ppty outside of Baddeck.
Nice country.

Now that the clubhouse has burnt down at Belle Bay.
Where does a thirsty golfer go after 18?

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Poor people and those with poor credit ratings and poor cash flow pay more for a lot of things.

They generally and rightly face the highest interest rates.

They pay interest on credit cards and subsidise wealthier people who earn points and rewards on credit cards and pay nothing in interest. The poorest people can’t get a credit card and/or use cash by choice but then face retail prices that are boosted by at least 2% to pay for those credit card fees (including to pay the costs of credit card rewards).

You bring up a very good point that I think gets misquoted by those hoping for a soft landing, namely that rising prices INCREASE demand for real estate (and other financial assets) and by contrast falling prices DECREASE demand for real estate.

It is backwards from a theoretical economics perspective but does apply in reality

(bonus points for anyone who wants to attempt to draw the supply/demand graph for the real estate market)

1) Move where exactly? My life, family, job, and career is all in the GTA. Like this blog has mentioned many times, money is not everything. Time and family/friends is. I’m not going to move away from my life and miss it all so I can save a few bucks. Woopee.

2) A “lesser property” starter home doesn’t exist anymore. That ship sailed about 10 years ago.

In April, just 43% of pre-sale condos offered in Metro Vancouver sold, compared to 94% in January, 83% in February and 63% in March, said Cameron McNeill, a partner in MLA Canada, the real estate marketing firm that hosted the Pre-Sale Pulse seminar at Olympic Village.

High-profile real estate developers, marketing executives and real estate agents are bracing for a sustained downturn in the housing market after sales in April – usually one of the most active months of the year – plunged by double-digits across Metro Vancouver.

… the price melt for houses here on Vancouver Island is slower than the Andrea Doria sinking into the North Sea. I’m tempted to put a stick into the ground to observe if there’s been any yearly change in the glacial pace of price point drops.

Below are excellent, well researched CBC podcasts on the Vancouver Real Estate market and the Foreign Capital debate. In my opinion the best episodes are 4, 5, and 6. Sorry if this is a duplicate posting, I don’t usually read every single comment every night.

cant give a way a home in rural saskatchewan, like no bid. at any price. there are litterly no buyers. no one is getting qualified for any mortgage over extended on big f150’s
i am offering the best deal i could think of for a house 3 bed 2 bath, 2 storey 1400 sq for $125K.
no buyers, town of 10K people.
so i am renting to anyone for 1250 month, they pay utilties, and in 8 years, they own the house, i simply sign it over to them. its that stupid now.

Danske Chief Executive Officer Thomas Borgen has apologized for failing to stop the bank from becoming a laundromat for alleged criminals who, according to the Berlingske newspaper reports that triggered the FSA’s probe, channeled billions of dollars from Russia, Azerbaijan and Moldova through its Estonian branch between 2010 and 2014.

The Danish government has called Danske’s role in the scandal “unforgivable.” The central bank says the case has put the whole country’s reputation at risk.

“The Danish Financial Supervisory Authority said on Thursday that Danske’s management failed on multiple counts to act in compliance with the rules. The assessment followed reports by the Berlingske newspaper that Danske was used as a laundromat by criminals, including entities with ties to Russian President Vladimir Putin, the Russian security service, FSB, as well as members of the Azeri regime. The money laundering, alleged to have taken place between 2010 to 2014, was done via Danske’s operations in Estonia, “….

And don’t forget the new carbon taxes which Turdeau intends to implement nation wide and which Nutely has already implemented. I’m not sure what the environment barbie has in mind for how this will work, will it be a carbon tax on a carbon tax sort of how federal and provincial income taxes work, or will there be a federal discount if you already pay provincial, or will it be harmonized like the HST? Either way it will take thousand’s of dollars a year out of a family of 4’s take home pay. So that’s going to squeeze what people can pay for a house even further (as well as everything else).

It’s super stupid, they could have accomplished the exact same thing by just doubling the HST only with a lot less paperwork. Calling it a “carbon tax” is pure evil virtue signalling. It is a tax on everything, including the power you need to charge your iPhone. So is the HST, but why not just double that? It would have the same effect on people’s spending. Sure, placing it on carbon might be good for the renewables industry, but it’s going to be years and years before that makes a sizable difference in the energy mix.

I can prove it’s just a tax grab by answering 3 simple questions:

“Will the carbon tax have a meaningful impact on the consumption of carbon fuels in Canada?” (The answer is no in the short term without crashing the economy, little effect in the medium term and maybe a bit of an effect in the long term but probably not much over what would have happened anyway. They were building windmills and LED bulbs before the carbon tax.)

“Even if it does reduce the consumption of carbon fuels in Canada, will that have a meaningful impact on global carbon emissions?” (The answer is no, Canada is a tiny country and even though per capita consumption is high because we’re rich and it’s freakin’ cold in the winter our emissions account for about 3% of the world total.)

“Even if Canada’s contribution to global warming is relatively small, can we set an example for other countries to follow and thus encourage larger countries to also enact carbon taxes and reduce consumption?” The answer to this one is a resounding “no”, China and the US will never have a carbon tax. Maybe in California but no where else. Nor will Russia, India, or any of the developing world. And China has actual real economists who worry about money instead of politics and they know that economic activity and energy consumption are closely tied together. They think what we are doing is silly.

So, since we can conclude that the carbon tax will have little to no effect on energy consumption in Canada, Canada can have little to no effect on the overall world wide consumption of carbon fuels, and even if Canada attempts to lead the world at great expense to it’s own people the world will not follow, we can safely assume it is just a tax grab wrapped up in a bunch of moral virtue signalling.

But it will have a significant effect on the Canadian economy as even more of your hard earned and already taxed 4 times money heads into the black hole of economics known as government.

Is global warming real? Probably. Will carbon taxes in Canada stop it? Hardly. Is it a big deal? I don’t know but you can still get a 40 mortgage in Florida so the banks don’t seem to think so.

Another quote from the YVR seminar you mention (“just over 40% of pre-sale condos available in Vancouver sold compared to almost 95% in January” provided by Richard Bell, executive vice-chair and founder of Avesdo Inc. at a YVR real estate seminar May 8):

Documents at Companies House give the name of one officer as ‘the Chicken Thief’, with the occupation of ‘fraudster’

pathetic!

The UK has at least 29 anti-money laundering regulators, with thousands of staff, yet none seem to perform checks on companies connected with questionable individuals. Individuals with criminal records can still control companies here because, the Department for Business says, “Companies House does not have powers to verify the authenticity of company directors, secretaries and registered office addresses”.

A colleague who was looking for a place since last year was able to negotiate over 170k for a townhouse in GTA. But in the same conversation he mentioned that Doug Ford winning the election and reducing tax will bring the house prices back up. Thoughts?

Is there a worse place to put money than the big 5 banks? The cost of living in Canada is far too high and the banks in Canada will reflect this fact in the future. That’s the reason you don’t hold Canadian bank shares unless it’s with subprime lenders.

Last month – usually peak real estate rutting season – was a mess. For example, just over 40% of pre-sale condos available in Vancouver sold compared to almost 95% in January. Detached home sales crashed 34% in YVR and 38% in the GTA. Prices in Toronto declined 14%, and in Vancouver condo sales dipped overall by 24%.-GT

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Prices in the core of 416 are still strong. Some of the outer limits of 416 are not fairing so well. Location, location, location.

The old adage has been proven true again – when prices fall, buyers leave. When prices surge, buying explodes. Human emotion, not logic, sets the tone.

You are offered two items, both priced the same with the same utility to you. One will rise in value while you own it. The other will drop in value while you own it. I would get the riser, you can have the loser. Logic,huh?

“Move and buy a perfectly fine house where real estate costs less and the locals have no idea what FOMO means.” We went to Ottawa and the insanity seemed to follow us….

@#30 China just launched the worlds largest carbon market. they will be using it to hit their Paris accord goals. The EU has had a carbon market covering about 50% of all their energy production for years. The US and Canada are the last major markets to get a carbon tax/market…

The big 5 have a gov’t protected license to effectively print money. That won’t change no matter how bad the domestic economy gets. And they will never -ever – cut their dividends. That’s why they are so aggressive in squeezing debtors as they know the storm is coming and know what it takes to weather it. So yeah, I’m keeping my big 5 allocation nice and strong.

Trump just did it. Job numbers are up, unemployment down, confidence is high, and the stock markets are are plumping and swelling.

And the US debt/deficit situation is worsening daily. He kicked the can down the road. That’s not what a true conservative does. – Garth
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Unemployment rate is at lowest level since 2000, offshore money coming home to be reinvested in USA, corporate profits plumping and swelling, stock markets steadily rising….The Trumpet doesn’t care about your conservative label, he is cleaning up the mess he inherited and making it all work. Wasn’t it you that said the national debt was never meant to be paid off ?

He is not god. Get over it. Increasing the burden on future citizens to placate current ones never ends too well. – Garth

#45Aristocratic Canadian Millenial at Bayview or Davisville on 05.10.18 at 8:08 pm

Unemployment rate is at lowest level since 2000, offshore money coming home to be reinvested in USA, corporate profits plumping and swelling, stock markets steadily rising….The Trumpet doesn’t care about your conservative label, he is cleaning up the mess he inherited and making it all work. Wasn’t it you that said the national debt was never meant to be paid off ?

He is not god. Get over it. Increasing the burden on future citizens to placate current ones never ends too well. – Garth
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I see in my neighbourhood, all these monster homes going up, slowly. Probably contractors, their side hustle is buying up 60-year old homes close to Toronto, hoping to flip ’em. Only now they’re too slow, too late and when they go to sell, they won’t get anything near what they are expecting. So they make sure the house is super-large, hoping some sucker buys it… eventually.

When Doug Ford is elected he will reduce allocations to municipalities as he tries to get a handle on finances. Look for those municipalities to drastically ramp up property taxes. The money has to come from the people who have it. All your artificial gains will get taxed back.
In 10 years you will all realize you have been had. You may feel wealthier today with property gains but as a society we are stagnating and instead of administrating responsibly the government intends to expropriate every nickel they can steal.
You will pay for all their excess as they squeeze every ounce of wealth they can extract from you.
At one time people served on school boards for free to give back to the community, imagine that.

It is backwards from a theoretical economics perspective but does apply in reality

(bonus points for anyone who wants to attempt to draw the supply/demand graph for the real estate market)

I’m not an economist, but Steve Keen seems to be trying to create a theoretical model that encompasses behavioural dynamics. I’m sure others are doing the same, although they are largely left out the the official economics textbooks.

The sad thing is that even those that hate Donald Trump with an incredible irrational fervor accept that- with the possible exception of Doug Ford-we don’t have anyone in this country to even attempt to right the sinking ship of state.

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The government license is often said to be the reason for the profit of the big 5 banks. It is said that they are an oligopoly.

But I don’t think it is the license or charter that is the real reason for the big profits.

There are 28 licenced Schedule I banks in Canada. Plus 21 foreign banks and 44 Trust companies and 18 loan companies. These are just the federally regulated banks/lenders. There are scores of provincially regulated credit unions. Is this really an oligopoly?

If having few competitors was the key to profits, Air Canada would not have gone broke twice.

Usually companies with a commodity profit struggle to make big profits. When you borrow money or put money into a a savings account (especially where Canadian Deposit insurance applies) that seems very much like a commodity product.

I think the real reason for bank profitability is that once they nab us as a customer we tend to stay. It is very inconvenient to switch your main chequing account. So we seldom do. And for many people when they need a new financial product it is simply more convenient to just get it from their current bank.

Also bigger banks have greater scale and lower costs, including advertising costs. So, once the big five got really huge they had lower costs and huge visibility and it became hard for the licensed smaller competitors to compete.

Another reasons for big profits is that they are leveraged to the hilt. Royal Bank has common equity of about 5% of its assets although they calculate closer to 9% on a risk-weighted basis.

I believe a quiet collusion or a gentlemanly restraint in competition also contributes to profit. Almost every bank charges the same 2.5% foreign exchange fee adder on their credit cards.

Branding also comes into it. At the end of the day we might not love Royal Bank or TD but we trust them not to actually steal our money. We mostly don’t have the same trust for tiny banks. There is a reason the nice lady at the bank attracts so much investment money. Trust and convenience are a big part of that reason.

The big five banks do make huge profits (think 18% return on equity) but how can the license or charter be the reason when there are loads of licensed competitors?

“So, many renewers are trapped. And what a coincidence all the banks have raised lending costs when you can’t get out! Almost like they knew about the tidal wave of maturing loans…”
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Hahahahaha…now you’re sounding more like me (conspiratorial).
In my view, very few things are actually coincidence. The ultra-elite have all the time and resources they need to plan out every detail.
Heck, they even figured out how to destroy sky-scrapers with planes! LOL

I remember when you were an MP Garth and Harper and Flaherty changed the mortgage rules for CMHC.You were dead set against it and they tried to destroy you.If only they had listened..they created a false economy which is now heading for the largest loss of personal wealth in Canada’s history i.m.o. Thanks for your service Garth you were so right!

the uk is the epicenter of financial fraud. Nearly all the tax havens are British territories. Every country that has a chronic housing bubble (or had one) has UK banking and legal system (property/banking/land laws):

Australia
Canada
USA
Britain

If you neutered UK corruption and money laundering, poorer countries would be a lot less poor. That’s costing real lives every single day.

the only greaterfools are the ones who comment here believing the market will crash. Maybe in most parts of canada but not in vancouver and toronto. Try buying a 1 or 2 bed condo and you gotta compete with others.

Hah. As I’ve pointed out a zillion times when real estate crashes the stock market starts to dance. Every month of gains on the market has squeezed the trapped real estate holders and the main will only accelerate. Look at where the market has gone since the RE crash began in earnest…tickling 16000 again….Hah.

For those with nothing but a fat sucking you will watch the sweet dividend paying aristocrats spitting out huicy dividends and additional capital gains…..while you’re mortgage goes up and you have to cut back to McCafe from Sbux. Happy KD nights ……with the kids.

Nothing you can do now…..you’re in the pincers of an immediacey bias that will drain you for a decade while the conversation turns from flipping condos to flipping burgers. Expect the number of realtards to drop dramatically in the first six months. I bet anyone that the abandonded desk and auto lease jingle mail carnage has already started.in a year the street signs will be exclusively Mom’s with zero education and few job prospects working RE part time with a working husband. Back to the Future every time. Most are like behind on desk rent and six months of no commission will mean downsizing and selling the furniture. Hah…..seen this dozens of times.

I said months ago that sub prime would explode….and here it is. 8% is nothing…….I’ll start lending at 15%….meanwhile the market is giving me that so no point in jumping ship. A mentor of mine once said….”Always ride your horse the direction it wants to run”. In other words ….the trend is your friend.

Anyway, I’m going to Bali…..buying stocks every day now as higher highs confirm a nice firm recovery…..

When are you going to make a post on cheap landlord guy repairs? Anytime my tenants ask me to do something that I don’t feel like doing all I have to say is oh I wasn’t planning on doing that until I sell the house. Now they would want me to consider doing that right? That’s the biggest fear among renters. That and Dougie removing rent control.

These pictures you get are awesome just by themselves! lol My GF is in real-estate and keep sending her here….she’s like quite being so negative! I say you’re part of the problem! lol I sleep on the couch often.

#43 crowdedelevatorfartz
As an ex-teacher I can remember those Fridays before the May long weekend when many students were missing from class as their parents took a day off work and then took their kids out of school so the family could get away a day early and avoid the long weekend traffic. That Friday often became a wasted day because of the missing students and thus an important lesson couldn’t be taught because it would just have to be taught again when the students returned. It’s not a bad idea to have the teachers take that day as a PRO-D day…they are at workshops, not driving off to the lake.

No Leo Trollstoy, Garth was not right – just ask 2013 peak/apex RE Mark.
2013 peak/apex RE Mark is always right. His sales mix theory makes complete sense. Didn’t you read his many posts? I even agree with him that there is no inflation in Canada even with gas at $1.61 in Burnaby.
2013 peak/apex RE Mark – I am sure you know I am being extremely sarcastic.

#9 – the only way ‘wealthy’ people or anyone who has a credit card can pay ‘nothing in interest’ is if those people pay off the monthly balance in full each month before the due date. Poor people are not ‘subsidizing’ other cardholders when they do not pay off their credit cards. They are only ‘subsidizing’ the credit card company.

You are in dreamland if you think this 21t debt and 2t deficit situation lasts past the end of the year. I think the next six months it comes home to roost. The US yields creeping up tell you all you need to know. The US is a fiscal timebomb about to go off.

The problem with the US is no admistration can ever cut spending. Reagan couldn’t, David Stockman’s book explains why. No senator wants spending cut in their state, so nothing ever gets done. Trump isn’t even trying.

I am so fiscally conservative I make Barry Goldwater look like Bernie Sanders. Barry Goldwater and Rand Paul are my heroes. Rand is the only senator out of 100 saying spending should be cut.

Garth is right. A real leader doesn’t tell his Fed Reserve to keep rates low to kick the can down the road. A real leader balances the budget and makes government as small as possible so taxes are low and things thrive.

That isn’t actually true. We have Maxime Bernier, who was my first choice in the leadership race. His platform was incredible, a true voice of freedom. He’ll have a big influence when we get back to governing.

First point is that carbon taxes in Canada are just a tax grab. You only have to live in Dubai or Hanoi to realize that Canadians paying more is not going to make even a tiny bit of difference to global warming until the many second and third level countries in the world under going their industrial revolution stage get through it or decide themselves that global warning is of concern. You can’t even see properly in downtown Hanoi due to pollution but they don’t care -yet. Canadians are suckers to fall for this one. Tax grab.

The Prime Minster of Australia said that asking his country to have carbon taxes when China didn’t was a joke so he didn’t charge them. Australians do call it as it is in life.

Second point is that many Canadian levels of govt are dependent for their own spending on RE taxes through the buying and selling process. What will happen now the tap is switching off. Yep, more taxes to compensate. Or Ford being elected to turn the tap on again in Ontario.

“Bought 12+ years ago. Mortgage now is about $300K, with basement rental income of $700/month. Was that a ‘dumb’ move?”

What did you pay, what is it worth? Subtract and see if you are happy with the answer…

Wrong answer. Subtract the total ownership costs and what the equity might have earned in other investment vehicle, less rental equivalent, from the difference between acquisition price and market value. – Garth

Yes, I agree my explanation was not complete yet it is not completely wrong. Ownership costs depend on what his mortgage was and the other costs of owning a home versus the rental costs he would have paid. Once that is out of the way and determined then one would have to compare the invested funds total appreciation which are taxable versus the non taxable capital gains on the home. Now you can make the final decision…

It seems as if ALL “Pro D” days are on a Friday or a Monday…longweekend or not.

And the endless, monthly “Professional Developement” days seem a tad excessive dont you think?
Skills training/upgrading EVERY month? Seriously?
What was the 5 years of University for?
To learn all the different, endlessly increasing, politically correct, gender specific terms foisted upon an overloaded public?
I’ve yet to think of another skill other than a doctor, policeman or firemen that requires skills training on an ongoing basis.
And while those professions may be required to prove their treatment, gun range, fitness skills are proficient…even they dont do it every month.

The 2 month Summer break, 2 week Christmas break and the 2 week Spring break are a nice perk as well.
One would think a few ‘Pro D days could be inserted in a few of those “kid free” days?
Just a thought from an overtaxed taxpayer frustrated at seeing and hearing the endless bleating from the Teachers union reps about how hard they have it every time its contract renewal time.

Commenters like this really make me laugh.
After a 16 year run up in prices predicated on “perfect storm” conditions, they think that it is the norm and that an economy can progress with housing prices detached from economic reality.

“First point is that carbon taxes in Canada are just a tax grab.” You do know that carbon taxes are revenue neutral, don’t you? Does revenue neutrality also need to be explained to you? Didn’t you once say that you’re a former teacher? I shudder to think! :)

Garth, you’re always a ray of sunshine, my morning pick me up when I’m feeling blue. I think I’m going to start investing in funeral plots as my real estate fix or go back to plan B – win the lottery. Oh yeah, Chase the Ace is on tonight Garth, now that you’re one of us :)

On the topic of “starter homes” – I am personally renting to avoid one b/c the transaction costs and transfer taxes in the GTA are so prohibitive that I’d prefer equity to sunk costs. Not sure how long I can drag this out but TRYING!

Walked in to CIBC yesterday to meet with a mortgage rep. An hour later I was approved on the spot for a 5 year fixed 3.19% mortgage. They’re holding it for me for 120 days.

I’ve had similar experience with Scotia (CIBC rate is slightly better). Looking to get the hell out of TD – terrible customer service.

Point is, this stress test seems to be a non-issue for me – is this true for most others as well? I make $120k/year, wife makes $100k/year. I think that’s pretty standard for a DINK professional working couple in Toronto. Not sure how much of an impact this much-maligned stress test will have on markets with good jobs/reasonably high incomes – i.e. YVR and YYZ.

If you can handle payments at 5.34% within debt-service ratios, you’re approved. If not, too bad. (BTW, not everyone has a household income of $220,000.)- Garth

#64 georgist on 05.10.18 at 10:31 pm
> #16 Who is the fool on 05.10.18 at 6:17 pm

> I don’t know where any of the info In this blog is coming from – have you tried buying a condo in Toronto today ? Multiple offers within hours of listing

> Only fools are those who ever sell real estate or listen to this blog and don’t buy (even now)

Didn’t have to scroll down as far today to find a desperate landlord.

Good stuff. Keep ’em coming.

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Desperate landlords? I wish some of my tenants would leave so I could obtain the skyrocketed market rent. Thanks Libs.. I wouldn’t even miss a month’s rent either. All I need is two days to clean and roll a couple walls and steam the carpet upstairs. Done.

Post your home value here in the next few days (as in comparable listings, not what you think it is worth).

Get back to us with its value in the 4th Qtr.

Then we can determine for certain if the following holds true:

“Prices in the core of 416 are still strong.”

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I sold last year in May and moved to Welland. I was in a so so neighbourhood in Etobicoke, sold and got more house in Welland for 1/3 of the price.
I still follow prices in certain neighbourhoods though.

#104 Robert Stann on 05.11.18 at 9:39 am
“I make $120k/year, wife makes $100k/year. I think that’s pretty standard for a DINK professional working couple in Toronto.”

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Is this a Toronto thing, where everyone imagines that everyone else in the city makes ridiculous money? I ask because my brother, who lives in Oakville, does exactly the same thing. At Christmas dinner one year he declared that anyone who makes less than $100k is a loser.

Per StatsCan, the median HOUSEHOLD income in Toronto was $78k in 2015 ($81k nationwide). Either the government doesn’t know how to do a survey, the haves and have-nots in Toronto are separated to the point that you don’t even cross paths with the common man, or you guys are vastly out of touch with what your neighbours are actually doing.

Same old. Trading in good jobs for bad, but it’s all good news at the Trudeau propaganda ministry.

Looks like the CBC has been told not to use the words “manufacturing jobs” anymore, and wage growth numbers can be posted as a positive indicator while forgetting to mention the minimum wage increases made law by government (not initiated by the economy).

I got a flyer in the mail with local paper the other day. The annual Home N’ Garden special. The flyer claims that trees, grass, and plants are good in reducing carbon. In fact, it claimed that one tree (no further definition) would consume enough carbon to offset the output of the average car for 17,700 km per year.

I have three yuge maples on my property along with several other smaller trees. In addition I have a half acre of lawn. Apparently lawns of 2500 square feet produce enough oxygen to support the average family of four for a year!

This is more than enough greenery to offset all of my family’s carbon producing activities. Do ya think Trudeau and Wynne will let me sell some carbon offsets? For the good of the planet, of course.

Everyone wants to feel good about themselves and feel they are doing good. The real problem is the intentions of why people want to feel this way and evaluation of whether those feelings are long lasting.

Are you buying a house for logical reasons or just because of trends and what other people are doing? Why be a sheep?

Consequently many in the general public haven’t planned well. For those that have planned well good to remember that in 100 years it wont matter.

Best to start evaluating intentions of decisions. Why you are doing what you are doing. If the whys are for the right reasons you can stand assured that you are building something that lasts.

“First point is that carbon taxes in Canada are just a tax grab.” You do know that carbon taxes are revenue neutral, don’t you? Does revenue neutrality also need to be explained to you? Didn’t you once say that you’re a former teacher? I shudder to think! :)
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Carbon taxes in Canada do not have an explicit purpose. Ottawa allows compliant Provinces to use the revenue as they see fit. There is no standard goal, or established cost for any action or mandate for which the Carbon Tax was created to cover the cost.

In other words – it’s a cash grab just like Jane24 said.

If it is “revenue neutral” as you say – please link to the initiative for which the CT was created to finance – and the costs thereof.

In Ontario, the last “revenue neutral” program the Libs initiated was the E-Test for vehicles. After a decade or more running the program it was discovered… that they were making millions off of it.

#104 Robert Stann on 05.11.18 at 9:39 am
“I make $120k/year, wife makes $100k/year. I think that’s pretty standard for a DINK professional working couple in Toronto.”

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Is this a Toronto thing, where everyone imagines that everyone else in the city makes ridiculous money? I ask because my brother, who lives in Oakville, does exactly the same thing. At Christmas dinner one year he declared that anyone who makes less than $100k is a loser.

Per StatsCan, the median HOUSEHOLD income in Toronto was $78k in 2015 ($81k nationwide). Either the government doesn’t know how to do a survey, the haves and have-nots in Toronto are separated to the point that you don’t even cross paths with the common man, or you guys are vastly out of touch with what your neighbours are actually doing.

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I think the key word in his post is “professional”.

He’s referring to people with graduate degrees or certifications – doctors, lawyers, MBAs, accountants. May also refer to those without the above but who are in managerial/director-level roles.

For that group, certainly once above the age of 35/40, $100K would be pretty average in Toronto.

Agreed – and point well taken. I’m just wondering if those that do earn an upper-middle income along with those who already own property and have sufficient equity built up will be a large enough buying-base to keep prices strong in certain markets. Thoughts?

The view must be nice from your ivory tower. Congratulations, you have high income and choices for your mortgage. Now go down to the Princess Margaret oncology clinic and tell a bunch of patients how cancer is a “non-issue for you”.

I suspect you didn’t mean to cause harm with your comment, but please think before you post. The stress test is a significant issue for many and will be the source of complete financial ruin for some. I believe a little compassion is in order.

@rental property math, my landlord just sold the condo I was renting. It took two weeks to sell and sold for 15k less than asking. Out of 10 showings they received just one offer, a nice older gentleman who was worried about the view, the sound of the fan, the size etc. My prediction is that he will regret his purchase and it will be back on the market in less than one year, for an even lower price.

While I expect interest rates to rise, its material to
note that money is still incredibly cheap. Bank of Canada benchmark may be 5+ but I am 20 bps under 3 on mine. And BMO just posted a 5 year under 3.

“As for wannabe buyers who can’t pass the test, three choices. (a) Move and buy a perfectly fine house where real estate costs less and the locals have no idea what FOMO means. Mom will understand. Really. (b) Buy a lesser property. (There actually used to be things called ‘starter homes.’) or, (c) rent.”

All three choices are above most peoples pay grades.
Employers are not made of money and neither are their employees.

Consequences are funny things. Donald Trump and an increasingly hawkish foreign policy team tore up the landmark nuclear agreement with Iran this week, as Trump’s anti-globalist support base back home cheered the move. Yet among the first victims of the decision is not Iran’s hardliners, nor even Iran’s economy.
It was instead the American aerospace firm Boeing that lost; Washington has said it will now revoke Boeing’s licence to sell $20 billion US of aircraft to Iran.
Hmmm, smart move Donald.

And don’t forget the new carbon taxes which Turdeau intends to implement nation wide and which Nutely has already implemented. I’m not sure what the environment barbie has in mind for how this will work, will it be a carbon tax on a carbon tax sort of how federal and provincial income taxes work, or will there be a federal discount if you already pay provincial, or will it be harmonized like the HST? Either way it will take thousand’s of dollars a year out of a family of 4’s take home pay. So that’s going to squeeze what people can pay for a house even further (as well as everything else).

It’s super stupid, they could have accomplished the exact same thing by just doubling the HST only with a lot less paperwork. Calling it a “carbon tax” is pure evil virtue signalling. It is a tax on everything, including the power you need to charge your iPhone. So is the HST, but why not just double that? It would have the same effect on people’s spending. Sure, placing it on carbon might be good for the renewables industry, but it’s going to be years and years before that makes a sizable difference in the energy mix.

I can prove it’s just a tax grab by answering 3 simple questions:

“Will the carbon tax have a meaningful impact on the consumption of carbon fuels in Canada?” (The answer is no in the short term without crashing the economy, little effect in the medium term and maybe a bit of an effect in the long term but probably not much over what would have happened anyway. They were building windmills and LED bulbs before the carbon tax.)

“Even if it does reduce the consumption of carbon fuels in Canada, will that have a meaningful impact on global carbon emissions?” (The answer is no, Canada is a tiny country and even though per capita consumption is high because we’re rich and it’s freakin’ cold in the winter our emissions account for about 3% of the world total.)

“Even if Canada’s contribution to global warming is relatively small, can we set an example for other countries to follow and thus encourage larger countries to also enact carbon taxes and reduce consumption?” The answer to this one is a resounding “no”, China and the US will never have a carbon tax. Maybe in California but no where else. Nor will Russia, India, or any of the developing world. And China has actual real economists who worry about money instead of politics and they know that economic activity and energy consumption are closely tied together. They think what we are doing is silly.

So, since we can conclude that the carbon tax will have little to no effect on energy consumption in Canada, Canada can have little to no effect on the overall world wide consumption of carbon fuels, and even if Canada attempts to lead the world at great expense to it’s own people the world will not follow, we can safely assume it is just a tax grab wrapped up in a bunch of moral virtue signalling.

But it will have a significant effect on the Canadian economy as even more of your hard earned and already taxed 4 times money heads into the black hole of economics known as government.

Is global warming real? Probably. Will carbon taxes in Canada stop it? Hardly. Is it a big deal? I don’t know but you can still get a 40 mortgage in Florida so the banks don’t seem to think so.
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Well said! Turdeau wants to be know as the great prodigious purveyor of all things amazingly injudicious.

The paper, by You Suk Kim, Steven M. Laufer, and Karen M. Pence of the Federal Reserve Board and Richard Stanton and Nancy E. Wallace of the University of California at Berkeley, argues that liquidity risk associated with the nonbank mortgage sector was also a key driver of the crisis—and those same vulnerabilities are not only still present, but pose an even greater risk to the system today because the nonbank sector is an even larger part of the market.

“Nonbank mortgage originators and servicers—i.e. independent mortgage companies that are not subsidiaries of a bank or a bank holding company—are subject to far greater liquidity risks but are less regulated than bank-lenders and servicers. As of 2016, non-bank financial institutions originated close to 50 percent of all mortgages and 75 percent of mortgages with explicit government backing.”

#113 IHCTD9 on 05.11.18 at 11:04 am
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Same old. Trading in good jobs for bad, but it’s all good news at the Trudeau propaganda ministry.
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The long term trend to service jobs vs. manufacturing jobs has been going on for many decades. The jobs report shows an increase in full time work and a drop in part time work? How is this a bad thing?

The following quote from BNN (does T2 pay them as well?)

“Don’t let the headline number fool you, this really wasn’t that bad of a report,” Brian DePratto, senior economist with TD Economics, wrote in a note to clients. “Full-time employment rose again, and the employee vs self-employment mix was encouraging. Wage growth was solid.

#113 IHCTD9 on 05.11.18 at 11:04 am
________________________
Same old. Trading in good jobs for bad, but it’s all good news at the Trudeau propaganda ministry.
_______________________
The long term trend to service jobs vs. manufacturing jobs has been going on for many decades.
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Yes, and I look at the situation from a decades long perspective – I’ve had a front row seat.

From this perspective, good jobs are leaving along with the industry that gave rise to them. Equivalent work has not appeared on the scene to cover the losses. These “Service” jobs that have surfaced as a thing to talk about – are crap. So is working contracts (ie. “self employment”). Debt pays the bills for a lot of Canadians today.

Until something new comes along – I plan to keep centering my opinion around the facts as they actually are – no matter who is running the show. Nothing changes at the IHCTD9 compound if Scheer gets in and things still suck.

Just because it was priced ridiculously low in the Yonge and Lawrence area for 795K. I know a house was sold $3 million over-asking last year because it was price at $1.

I live on this street. Another almost identical house sold for $1.3m last year, so that should show which way the market is trending. It is a nice enough house for sure, great location close to Yonge/Eglinton.

As for BlogTO, clearly they have no concept of the fact that a listing agent would underprice the property in order to create interest!!

#136 IHCTD9 on 05.11.18 at 1:24 pm
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They absolutely pander to whatever government happens to be running the show….
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Wow is this ever the opposite of reality. Harper HATED the CBC and the feeling was mutual.

CBC is the perfect complement to and representation of the confused, needy, unsure, insecure, sensitive, unable to think by himself, wanna be successful/proud average Canadian that tells him how great he/the average Canadian/ is doing and why he should be happy.

CBC is here to stay, people (who never really grew up) here want to be happy and be attended to, reality is too harsh to be faced.

#140 CJBob on 05.11.18 at 2:11 pm
#136 IHCTD9 on 05.11.18 at 1:24 pm
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They absolutely pander to whatever government happens to be running the show….
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Wow is this ever the opposite of reality.
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Perhaps to someone who’s partisanship calls the shots.

When Harper got in, the CBC rhetoric ABSOLUTELY softened to the Cons. Harper was one of the most hardline Cons to hit Ottawa in decades. He should have got the same treatment Trump is getting now from just about the entire US MSM, but he didn’t. Not even close.

Now that Trudeau is in, they play his music. The CBC doesn’t bite the hand that feeds. Well.. no harder than absolutely necessary.

What Harper or Trudeau themselves think of the CBC is irrelevant.

Don’t get me confused as a political fanboi, I’m miles past that – even if you do hear me freely (and regularly) admit that Trudeau is a colossal airhead and the single worst PM this country has ever had by 500 billion miles. If you’ve read any of my tripe on this blog, you already know I’m taking matters into my own hands. This won’t change if Scheer and/or Ford get in and do not produce results.

FWIW, I bashed Patrick Brown on the regular prior to his me-too political take-down. I’m also going to vote for Wynne (“strategically”).

This is more than enough greenery to offset all of my family’s carbon producing activities. Do ya think Trudeau and Wynne will let me sell some carbon offsets? For the good of the planet, of course.
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Doubtful! Considering Canada as a whole has enough trees to offset our populations carbon footprint by about 5-8 fold, no politicians seem to care. It’s too bad considering as a nation we’ve chosen to protect many of those forests instead of clear cutting them like in many other parts of the world in the name of industry. You’d think we should be rewarded and applauded for that, but then how would the politicians make any money (tax) off us for that?!

WASHINGTON, May 10, 2018—The Federal Communications Commission today fined
Adrian Abramovich $120 million for malicious spoofing that was part of his massive
robocalling operation aimed at selling timeshares and other travel packages. The caller ID
spoofing operation made almost 100 million spoofed robocalls over three months. The Truth
in Caller ID Act prohibits callers from deliberately falsifying caller ID information with the
intent to harm or defraud consumers or unlawfully obtain something of value

Atlas shrugged is the average middle class Canadian schmuck who is expected to perform wonders while living frugally in order to serve the others – the unionized parasites, government workers, baby boomers, millennials.

And who will never retire.

Whole life in exchange of cardboard particles home or glass condo. What a fulfilling life.

#119 IHCTD9 on 05.11.18 at 11:33 am
“If it is ‘revenue neutral’ as you say – please link to the initiative for which the CT was created to finance – and the costs thereof.”

Does this help you? “Revenue neutrality remains the core principle of B.C.’s carbon tax. The tax can increase only if it remains revenue-neutral and every dollar is returned to citizens in the form of tax relief.” — FACTSHEET: B.C.’s Climate Leadership (Friday, March 31, 2017 10:25 AM)https://news.gov.bc.ca/factsheets/bcs-climate-leadership

Of courses, this article ignores the fact that boomers are spreading to all secondary cities surrounding the bigger ones, cashing out, and bidding up houses in smaller communities.

After all, when you sell your Vancouver shack for 3 million to non-resident or reident buyers, why not spend an extra 50 or 100k on a house in a surrounding community to make sure you get it.

They are still buying houses and creating the same price – local income disjuncture as they did in the major urban centers. So the affordability crisis spreads further across provinces.

Contrary to layman reports, April in South Vancouver Island was still a relatively hot month. One quarter of houses sold over asking in Victoria; inventory remains slightly above last year; and quality homes are selling in a day for over asking. And this comes post-B20 implementation when all the pre-approvals have expired…and we are supposed to see the effect of wiping out 20% of buyers.

After they decimated key urban markets, they are now destroying secondary markets. Gee, what a truly helpful generation.

I don’t think those heralding B20 as the demise of the market factored in the unprecedented boomer segment and its ability to manipulate the market by virture of having large sums of equity capital. Their spread of capital is now in its second destructive phase.

Seems those patient ones on the sidelines will be renting a lot longer in the secondary markets, hoping for a break in several years time.

Destructive Spillover: ”
Of courses, this article ignores the fact that boomers are spreading to all secondary cities surrounding the bigger ones, cashing out, and bidding up houses in smaller communities.”
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The article seems to ignore alot, such as those boomers having a tough time finding buyers. Lol

As others have pointed out Canada has a lot of trees besides the 3 measly ones you have. I have probably 40 good size trees on my property (never counted them, but there are a lot) but no I will not get a tax credit for that.

However in the city if you want to cut one down there is now a $4,000 fee because they are of course environmentally important.

Canada is definitely guilty of clear cutting in the past, but for some time now the cut forests have to be replanted. Sure it takes 20 years for a replanted forest to be the carbon consuming behemoth it once was, but it comes back eventually.

CO2 is plant food. Without CO2 in the air all plants would die which means all life on the planet would die. This is never discussed in the debate. Instead CO2 is described as a poisonous pollutant. This is absolute balderdash, there must be CO2 in the air, the only question is how much and how fast it can increase.

And you and the other commenters are right, Canada is a net carbon sink because of all the forests and farmland too.

In years past carbon based fuels were responsible for a lot of nasty pollutants like SO2, NO, NO2, lead, etc. But that’s mostly been cleaned up. To throw CO2 in with that mix of nasties is just silly. It’s plant food! That’s how it got to be oil in the first place! Plants absorbed the CO2 and then got buried. Coal is trees folks! Highly polluted trees due to being buried, but trees none the less.

If you want to be Atlas and shrug It’s easy. Most of the world consists of various indigenous groups living underneath Atlases who have shrugged. Pick a country. If you live in North America or Western Europe you live in the “hive” so to speak of wanna be Atlases, most of whom will never reach their potential.

Go travel a bit and you’ll see.

We’re a parasite species living on top of other species.

The hardest part about shrugging is getting the beer imported afterwards.

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The views expressed are those of the author, Garth Turner, a Raymond James Financial Advisor, and not necessarily those of Raymond James Ltd. It is provided as a general source of information only and should not be considered to be personal investment advice or a solicitation to buy or sell securities. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor's circumstances and risk tolerance before making any investment decision. The information contained in this blog was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. Raymond James Ltd. is a member of the Canadian Investor Protection Fund.